The global objective of this research is to elucidate the molecular mechanismls underlying growth, differentiation and development in mammalian epidermis and its appendages, and to understand how this process goes awry in human skin disorders, including cancers. A central issue in achieving this goal is to understand how embryonic cells choose between an epidermal vs. hair cell fate, and how adult skin is able to maintain a pool of multipotent stem cells in the hair follicle that enable them to drive new growth during the hair cycle and repair the epidermis on injury. Two key signaling pathways, Wnt and Bmp, are involved in transcriptionally orchestrating this process, but the underlying mechanisms and critical genes they govern remain unknown. Wnt signaling stabilizes beta-catenin, which acts as a transcriptional co-factor for the Lef/Tcf family of DMA binding proteins. A Wnt reporter mouse reveals an early exchange of Wnt signals during skin embryogenesis when ectoderm (Lef1+) is stimulated by underlying dermal condensates to make a follicle. Wnt signals are also detected postnatally, when multipotent stem cells (Tcf3+) in the follicle are activated to initiate a new hair cycle. A final Wnt signal is transmitted when stem cell progeny, called matrix (Mx;Lef 1+) cells, are instructed to make the hair shaft rather than its channel (IRS). Excessive Wnt signaling promotes skin tumorigenesis in mouse and in humans. However, Wnts do not act alone. In embryonic skin, a Bmp inhibitory signal maintains Lef1 expression, enabling stem cells to transcriptionally respond to Wnts to form the early hair bud. Bmp inhibition is also required to maintain the MX pool, and subsequently, Bmp activation causes MX cells to terminally differentiate. When Bmp signaling is blocked, MX cells continue to proliferate uncontrollably, leading to skin tumors rather than hair. This cancerous condition resembles Cowden's disease in humans, some of whom harbor mutations in Bmp receptors. This proposal is aimed at identifying the essential direct target genes of Wnt and Bmp signaling at these critical junctures in skin development and to elucidate why these signals regulate proliferation in some steps and differentiation at others. By dissecting how these signaling pathways operate in transcriptionally balancing stem cell activation, proliferation and differentiation in the embryonic and adult hair follicle, the applications to genetic skin disorders and medicine should continue to unfold, as they have in our past research funded by this grant.